Inflation is likely to benefit_______

1. Analyze the question The question asks who gains when inflation occurs. Inflation is a sustained rise in the general price level, which reduces the purchasing power of money.

2. Explain the concept Inflation redistributes wealth between groups:

• Debtors (borrowers) gain. They borrow money at today's value and repay later with money that is worth less.
• Creditors (lenders) lose. The money they get back buys less than the money they lent.
• Savers lose. The real value of their savings falls, especially if interest rates are lower than the inflation rate.
• People on fixed incomes, such as fixed pensioners, lose. Their income stays the same while prices rise.

3. Step-by-step solution Suppose you borrow ₦100,000 when ₦1,000 buys a bag of rice. If inflation doubles prices, you repay the ₦100,000 when ₦1,000 buys only half a bag. The real burden of the debt has fallen, so the debtor benefits.

Checking each option:

• A. Debtors: they repay with cheaper money, so they benefit. ✔
• B. Persons with back savings: their savings lose purchasing power, so they lose. ✘
• C. Creditors: they are repaid in money worth less, so they lose. ✘
• D. Persons on fixed pension funds: their income buys less, so they lose. ✘

4. Answer The correct option is A. Debtors.

5. Exam tip Remember: "Inflation helps those who owe, hurts those who own cash or earn fixed." Debtors win, while creditors, savers, and fixed-income earners lose. The same idea appears often in JAMB and WASSCE Economics, so it is worth learning well.